Strategic Allocation into Adaptation and Resilience Investments
Systemic climate risks from emerging markets may depress long term portfolio performance in developed markets (DM) by 50+%
Investing in reducing these risks is a core part of macroeconomic prudence
SAARI is an asset owner coalition, where they pledge 5% of AUM to climate systemic risk reduction within a 5 year time frame in investment grade opportunities
Investors commit 5% of AUM within 5 years in investment grade assets that reduce systemic climate risk (SAARI coalition)
SAARI secretariat conducts research on which climate impacts most reduce DM portfolio impacts
SAARI secretariat assesses which interventions are most effective in mitigating these impacts, best practices for their implementation as well as project design
SAARI facilitate the design of financial products for these interventions, including revenue streams, de-risking and syndication
Investing in strategic climate risk reduction (SCRR) reduces macroeconomic shocks and protects returns across asset classes
SCRR investments do not correlate with a DM equity or fixed income portfolio, providing diversification benefits
De-risking through blended finance provides attractive risk/return profiles
SCRR investments fulfil fiduciary obligations above and beyond purely financial returns
Agricultural yield volatility leads to higher prices contributing to inflation, central bank tightening and asset performance
Impacts on ports, roads, etc. disrupt supply chains, reduce corporate profitability and margins
Water shortage related conflict and agricultural shocks create migratory pressures contributing to political destabilisation in DMs
Strategic investments that build resilience and protect long-term value.
$1.5 trillion mobilised through SAARI over a 10 year period would be a sufficient catalyst to improve DM returns by 50-100 bps/year.
This would require a coalition with $30T of AUM across pension funds, life insurers, sovereign wealth funds, endowments and others.
Modelling systemic climate impacts on DM portfolios and counterfactuals with a financed SAARI portfolio
Best practices and considerations for intervention design to ensure adaptation impacts and return profiles
De-risking architecture to create investable EM financial products for DM asset owners
Scaling investor commitments to reach $30T AUM